This is not an insult, but ironically a rule of thumb within itself. Dumb is probably not the best word to use, but is definitely the most sticky since it rhymes. What I mean by dumb is that we are in a state of not knowing enough to make any type of intelligent conclusions when faced with potential decisions. It’s much more a lack of competence than a lack of ability.
What are rules of thumb? They are the shortcuts, compressions, heuristics we use in daily life to help navigate more complex situations. They are generally somewhat accurate and applicable but not necessarily for every situation. In the practice versus theory spectrum, they fall in between. They are more practical than theory because they have been tested in practice and do a relatively decent job.
Due to their broad nature, rules of thumb are not the most ideal set of rules or procedures for every given situation. You are almost always better off if you attain a better understanding of the situation and any applicable and relatable knowledge. For example, when buying a house for the first time, you most likely have little to no knowledge regarding mortgages or appropriate spending. A common rule of thumb is to take on a mortgage of no more than three times your annual salary. This rule of thumb might work from anywhere between a slim to wide majority of people, but it doesn’t work for those outside of that majority. For those unfortunate people, doing a little more analysis would have been a good investment saving them from either overspending, or spending a little more to get the home of their dreams.
Why are rules of thumb prevalent and easy to believe? First, they do have some reliability due to their broad application. Like mentioned before, they fall in the middle between practice and theory. Second, they take advantage of what is know as Satisficing. The term satisficing, first introduced by Herbert Simon, is a mental heuristic to help with decision-making. Satisficing is a combination of the words satisfy and sufficing. In essence, humans tend to make decisions based on satisficing rather than optimizing. Since there are usually time and knowledge constraints as well as additional costs, our brains try to get to a solution that is just good enough rather than the best for the given situation. Rules of thumb are easily understood as satisficing our needs, so they become prevalent.
So What Should We do About This?
The easiest thing to do is to pay attention when given a rule of thumb. Any time you hear someone offer one up, know that there is potentially a better solution. You do need to weigh the actual constraints and costs to determine if you have the time to do additional research and analysis. Given the circumstances, using the rule of thumb might be your best bet.
To avoid having to use the rule of thumb all together, you need to be a little more proactive.
How to be Proactive With Rules of Thumb
Rules of thumb are usually created for situations that are:
- Commonly experienced but rather infrequently, and
- More complex in Nature.
There are certain things in life that we can all expect to experience or encounter. Whether it be getting married, buying a home, having kids, or retirement. These are all things that happen to a majority of people. They are also rather infrequent occasions, maybe only happening once to a few times in our lives. Due to this infrequency, we tend to not spend a lot of resources or mental capacity in fully learning about them. The problem is that they tend to be more complex in nature. So we have a dilemma: which is that we should be aware of and comfortable with a decent amount of information, but are unwilling to spend an adequate amount of time or energy on those subjects or situations. Unfortunately, this is due to one of our biological constraints. Since we perceive this as not providing enough return for the costs it will incur we tend to do bare minimum, or like discussed above satisfice. That is not the case though and in reality some of these decisions will have a drastic impact on our lives further down the road. So spending more time learning about these infrequently common complex situations will actually benefit us.
Think Ahead About What You Plan on Doing in Life
It’s pretty simple to put yourself in a position to avoid having to follow a rule of thumb especially when it would lead you to an undesirable outcome. It requires you to be a little proactive. You might already do a decent job about thinking ahead and planning for your future, but for those who don’t, you at least want to start thinking about the next 3 to 5 years of your life. Where do you plan on being in life? What do you plan on accomplishing? For instance, you might know that you want to settle down, get married, buy your first house, and maybe have children (all of which are pretty common milestones for people during life, but are rarely talked about in terms of preparation). With those common, complex, and infrequent events figured into your 3-5 year plan, you can start spending some time learning more about them. Don’t ignore the rules of thumb you come across either because they can act as good starting points or guide posts along the way. Another example might be knowing that you want to start your own business within the next several years. There’s a lot that goes into running a business aside from your specialty or expertise. Start to learn other aspects of running a business early on but with enough time prior to branching out on your own. This would let you avoid having to follow any business related rules of thumb given constrained amounts of time and resources when actually starting and running a business.
Use the 33 Technique
- Read 3 articles on the subject matter. This will put you ahead of around 60-80% of the population in terms of knowing anything about a subject matter. For many people this will not provide the adequate amount of information necessary to make an optimized decision. We suggest going on to at least the next step.
- Read 3 books on the subject matter. This should put you into the top 10-20% of people with knowledge in the subject. You should be able to use the information you’ve learned to at least make a more informed decision.
- Complete 3 projects/or spend 3 years within the subject matter. This takes a little creativity because not all of life’s events will be easily simulated in a project and you most likely will not have the time or interest in learning about something for three years prior to a decision. Just a quick example of what you could do is interview people who have been successful or unsuccessful at what you are trying to pursue or accomplish to learn about their mistakes and triumphs.
Conclusion
So to avoid getting a bad deal after having followed a rule of thumb, make sure that you don’t have to follow the rule of thumb in the first place. Here is a little counterintuitive advice that we believe is good to live by:
“Act now to avoid having to act later. This requires you to think about the later rather than the now.”
-System Tinker
System Tinker 